The decumulation debacle

By Andy Stonehouse

It's odd that the most massive and looming issue facing the retirement industry remains fully in plain sight, but ... nobody wants to talk about it. Or, apparently, do anything about it.

I've been attending sessions at a DCIO-themed conference for a couple of days and a recurring theme has been the looming monster that is the shift to decumulation.

Simply put, while everyone in the business has focused their busy energies on getting workers to save their paychecks and maximize on those investments, evidently nobody spent much time thinking what was going to happen when those participants actually retired - and their tax-deferred savings fall back into their hot little hands.

In other words, while we've done our very best to equip the automobile of retirement with the highest horsepower engine possible, we neglected to attach brakes. Kinda totally neglected to do so, in fact.

Speaker after speaker noted that while everyone is aware that decumulation is coming - with those 10,000 or so boomers joining the ranks of Retired America every day - the notion of A. letting go of those invested funds and B. accurately and helpfully providing retirees with a steady source of income in retirement ... well, they both fail to get much traction in the industry.

Annuities, more than one expert said, still have a bad name (I covered the annuity sales business for about five years and apparently nobody ever told annuity salesmen that, so it came as a shock to me, as well).

But in moving to a model to provide guaranteed lifetime income, they're not a bad idea - provided you manage to line up the right product and don't end up like the fabled 92-year-old grandmother who still can't get access to the quarter-million she invested in one.

Annuities are far from the only solution, but ... like the notion of decumulation itself, it all seems like someone else's problem. Let us concentrate on managing your investments for now - and push you to save even more (several panelists opined the national savings rate should actually be closer to 12 percent of your income, and not just restricted to the sometimes dodgy world of 401(k)s). We'll work on what you need to do when you actually retire as a later project.

Is it an issue that's ever going to get more attention? According to the many experts, nobody seems that interested - until it's too late.